Pay employees who work abroad

Sending an employee abroad does not take them off your payroll. How you deal with Income Tax and National Insurance depends on where they work and how long you expect them to be there.

Income Tax

Keep calculating and deducting PAYE Income Tax on everything you pay an employee who works abroad. When they go, give them a letter stating the date they went abroad to work, and their gross pay and the tax deducted from the start of the tax year to that date.

An employee who will spend most of their time abroad for a year or more may get full UK tax relief on their earnings. Ask them to complete form P85 and send it to HMRC, which will confirm the tax code to use.

The tax authority in the other country may want deductions from the same pay. Contact HMRC's Employer Helpline and the overseas authority so you know what you owe in each country. Tell the Employer Helpline if an employee is going to work in an offshore area.

National Insurance

Deduct National Insurance on earnings for work done in the UK, even if you pay them while the employee is abroad. For work done abroad, the rule depends on the country. Your own liability to pay employer contributions follows your employee's.

In the EU, Gibraltar, Iceland, Liechtenstein, Norway, Switzerland and countries with a social security agreement, your employee usually pays social security where they work. Where a certificate of coverage keeps them in the UK scheme instead, deduct National Insurance as if the work were done in the UK. The certificate shows that no contributions are due in the other country.

The countries with a social security agreement are Barbados, Bermuda, Canada, Chile, Croatia, Guernsey, India, the Isle of Man, Israel, Jamaica, Japan, Jersey, Mauritius, the Philippines, the Republics of former Yugoslavia (Bosnia-Herzegovina, North Macedonia, Serbia, Montenegro and Kosovo), South Korea, Turkey and the USA.

In a country with no agreement, the 52-week rule applies only if you have a place of business in the UK, the employee is ordinarily resident in the UK, and they lived in the UK just before starting work abroad. Check with the social security institution in the other country whether contributions are due there too.